In the first half of the year of "various face-slapping," "all-weather" rises!

In the first half of 2025, Wall Street rewarded strategic indifference and punished overconfidence. Strategies that diversify asset risks are outperforming the market by nearly historic margins, which is in stark contrast to the concentrated bets on large tech stocks favored in recent years.

On June 20, it was reported that Société Générale's multi-asset investment portfolio, which tracks stocks, government bonds, corporate credit, commodities, and cash, is experiencing its strongest first half since 2008.

In the face of a market filled with uncertainty, diversified investment strategies have shown strong resilience. Developed market stocks overseas, gold, and even Bitcoin have all outperformed the S&P 500 index this year, as investors seek returns from opportunities outside familiar territories.

The report pointed out that the shift in investment strategies under uncertain conditions is also redefining Wall Street's investment logic, moving from concentrated bets to all-weather portfolio construction.

Strong Performance of Multi-Asset Strategies

Société Générale's multi-asset investment portfolio is experiencing its strongest first half since 2008. Even the classic 60/40 stock-bond allocation strategy, which was considered outdated during the pandemic era, has proven relatively resilient.

Meanwhile, the popular multi-asset strategy known as risk parity has risen by about 6%. John Davi, CEO of Astoria Portfolio Advisors, stated:

"For every indicator showing a strong economy, I can give you one showing an economic slowdown. Uncertainty has indeed increased."

His company's multi-asset ETF, with gold as its largest holding, has risen more than 10% this year. Davi noted that this portfolio "is designed to cope with uncertainty rather than predict uncertainty."

Traditional Concentrated Investment Strategies Struggle

Against the dramatic backdrop of tariffs, fiscal brinkmanship, inflation concerns, and geopolitical conflicts, the turbulence in the stock, fixed income, and commodity markets has not brought disaster to the bulls. On the contrary, months of market volatility have rewarded a strategically indifferent attitude, while traditional concentrated investment strategies have faltered.

The S&P 500 index closed lower this week, rising only 1.5% since early January. The yield on the 10-year U.S. Treasury bond remained flat this week, while the broader government bond index has only returned 3% this year.

In contrast, diversified portfolios have been driven by those long-ignored assets during the "Mag 7" exceptionalism era. Specifically:

Developed market stocks outside the U.S. and Canada have risen 14% year-to-date, the Bloomberg Commodity Index has surged 8% this year, and gold has skyrocketed nearly 30%.

Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group, stated:

"The macro backdrop has changed so rapidly this year. Concentrated investments help in a bull market, while diversified investments help you preserve gains when the macro backdrop changes frequently."

Investors Embrace Asset Diversification

Manish Kabra of Société Générale stated, "From the perspective of American investors, there is a significant resistance to holding assets outside the United States. You are only truly diversified when you hold assets you do not want to hold."

Currently, American investors are beginning to accept this message. According to fund inflows, the best-performing ETFs tracked by Bloomberg over the past month cover a broader range of asset classes, including gold, Bitcoin, overseas stocks, and short-term government bonds, as well as U.S. stocks and bonds.

Todd Sohn of Strategas stated:

"ETFs are a natural solution for seeking diversification through other forms of equity exposure or looking for yield in the fixed income space, especially for strategies with limited duration risk. Ultra-short duration strategies have attracted the second most inflows in our tracked categories."

Nevertheless, traditional asset classes remain the primary destination for investor funds. Equity ETFs attracted approximately $56 billion in June, surpassing the total for May and April combined. The total cross-asset flow currently stands at $523 billion, indicating that ETFs are on track to absorb over $1 trillion in funds this year.

Risk Warning and Disclaimer

The market carries risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions made based on this are at the user's own risk